Inmarsat dividend brought to earth by in-flight wifi mission

LONDON (Reuters) - British satellite company Inmarsat (ISA.L) cut its dividend on Friday to spend more on delivering wifi on commercial planes as it aims to become market leader in the fast-growing market.

FILE PHOTO: Staff at satellite communications company Inmarsat work in front of a screen showing subscribers using their service throughout the world, at their headquarters in London, Britain March 25, 2014. REUTERS/Andrew Winning/File Photo

The lower payout, which Inmarsat said shareholders will have to weather until cash flow improves in a few years’ time, sent its shares down 8 percent to 427 pence at 1100 GMT.

Chief Executive Rupert Pearce said it could not rely on future payments from a U.S. company which uses some of Inmarsat’s airwaves.

“We can’t take for granted the $130 million from Ligado, which is contracted to stop at the end of this year unless they get their licence back,” he said in an interview.

“That’s quite a big hit to free-cash flow in the short-term and rather than shuttering investment to compensate for that, the right answer is ... to maintain the pace of our investment in in-flight connectivity because we believe that continues to be a very, very exciting opportunity.”

Pearce said Inmarsat had about 30 percent of the in-flight connectivity market, with systems on 1,300 aircraft due to go into service over the next two years.

“We have established a strong presence from which to move forward and become the market leader,” he said.

Double-digit growth in Inmarsat’s aviation business helped offset declines in its maritime and enterprise units last year, resulting in group revenue rising 5.4 percent to $1.4 billion.

Increased investment in its in-flight network, however, and changes in the revenue mix took a toll on core earnings, which fell 5.5 percent to $751.4 million.

The company cut its final dividend for 2017 to 12 cents a share, giving a total payout for the year of 33.62 cents. It said the board had decided to cut the dividend to 20 cents per share for 2018 and keep it there until cash flow improves.

Inmarsat did not change its forecast for revenue of $1.3-1.5 billion and capital expenditure of $500-600 million.